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August 11,2017 U.S. and South Korean military officials plan to move ahead with large-scale exercises later this month that North Korea, now finalizing plans to launch a salvo of missiles toward Guam, claims are a rehearsal for war. The exercises are an annual event, but come as Pyongyang says it is readying a plan to fire off four “Hwasong-12” missiles toward the U.S. island territory and major military hub. The plan would be sent to leader Kim Jong Un for approval just before or as the U.S-South Korea exercises begin. Called Ulchi-Freedom Guardian, the exercises are expected to run from August 21-31 and involve tens of thousands of American and South Korean troops on the ground and in the sea and air. Washington and Seoul say the exercises are defensive in nature and crucial to maintaining a deterrent against North Korean aggression. The exercises were scheduled well before tensions began to rise over  President Donald Trump’s increasingly fiery rhetoric  and...

 August 10,2017 The Reserve Bank of India will likely have to drain up to $22 billion in excess liquidity from the financial system as surging foreign investments forces the central bank to absorb the dollar inflows and sell rupees to cap gains in the local currency. Foreign investments into debt and shares have reached a net $31 billion this year, compared with $2.7 billion in sales last year, due to factors including India’s low inflation and improving economic growth. The strong inflows have sent the rupee up nearly 7 per cent against the dollar and forced the RBI to buy more than $10 billion in the spot market and $10 billion in forwards this year — which has meant an equivalent infusion in rupees. Those rupee sales have added liquidity into a financial system already flush with cash after a ban on higher-denomination currency in November sparked a surge in bank deposits. Average daily liquidity has risen to around ₹3 lakh crore, well above the RBI’s goal of aro...

Lalit K. Jha, August 11,2017 Pakistan has built a “hardened, secure, underground” complex in a remote mountainous region in the restive Balochistan province that could serve as a storage site for nuclear warheads, an American thinktank said on Thursday. The Institute for Science and International Security, a nonprofit and non-governmental institution, said its observation is based on satellite imagery and investigation. It said in a report that the underground complex in the southwestern province “could serve as a ballistic missile and nuclear warhead storage site”. The purpose of the complex is not yet available publicly. But, the report authored by David Albright, Sarah Burkhard, Allison Lach and Frank Pabian, said it could serve as a storage site for strategic reserves and hence a means of protecting a counterforce nuclear strike capability. Given that Pakistan’s preferred delivery vehicle for nuclear weapons is missiles with warheads and given the physical characteristi...

August 11,2017 Compelled to offer big discounts to lure customers to shop online, both Amazon India and Flipkart have been incurring losses. Flipkart reported a net loss of Rs 2,306 crore for the year to March 31, 2016, on revenues of about Rs 1,952 crore. Amazon Seller Services — the marketplace arm of Amazon India — posted revenues of Rs 2,275 crore in FY16, up 122%. During the period, its losses increased to Rs 3,572 crore. Amazon India recently claimed it has overtaken Flipkart (excluding fashion units Myntra and Jabong) both in terms of value and volume over the past 18 months. In the June quarter, Amazon’s gross merchandise sales (GMS) grew 59% year-on-year while unit sales rose 88%. According to Flipkart the retailer was growing at 60-70% in terms of GMS. On Thursday Flipkart said SoftBank’s investment, a mix of primary and secondary capital, is part of the previously announced financing round with Tencent, eBay and Microsoft. With this, the total amount raised by Flip...

Somesh Arora, August 11,2017 Closing the gate after the horse has bolted is symptomatic of how the government and its regulators react. Toughened ‘procedures’ that are evolved at the bureaucratic levels are generally the outcome of a kneejerk reaction to some frauds or irregularities committed. The game is to shift the blame to system-failures, and try to plug the loopholes which were exploited by the fraudster. The government is attuned to plugging loopholes, quite akin to the little Dutch Boy. But loopholes are holes which will leak from elsewhere. Therefore, making better systems and procedures is considered as the key to fraud-prevention in the future. ‘A few jobs saved from vigilance are worth creating a procedure for all to follow’ is the maxim of bureaucratic red tape. The courts, therefore, have been appropriately laying emphasis on substantive compliance rather than procedural. This has even led to unnecessary litigation at times, because for babus, procedures are sacr...

Written by  Junaid Ahmad  ,  Rakhi Basu  ,  Pravin Krishna  |  August 12,2017 The coming into force of the Goods and Services Tax (GST) will unify the nation into a common economic market, obviating the need for goods to be taxed each time they cross a state border. Much of the current discussion about GST has focused on the tax structure and the complexities surrounding the implementation of the new system. Less appreciated is the fact that GST, by changing all aspects of business, from the location of production and investments to logistical and supply-chain optimisation, could fundamentally alter the economic geography of India. To paraphrase the writer Pearl S. Buck, “In our changing world, nothing changes more than economic geography. “ Prior to GST, the internal movement of goods was subject to a number of barriers. First, and most directly, there were taxes on the inter-state movement of goods and cross-state differences in VAT structu...

August 11,2017 The finance ministry expects India’s tax-to-GDP ratio to expand in the next two years on accounts of increased tax surveillance post demonetisation and implementation of the Goods and Services Tax. The government also expects to eliminate subsidy on LPG cylinders by March-end 2018 and to pare it on kerosene, the ministry said in the Medium-term Expenditure Framework Statement (MTEF) tabled in Parliament on Thursday. The tax-to-GDP ratio is expected to rise to 11.9 per cent by 2019-20, from an estimated 11.6 per cent in 2018-19 and 11.3 per cent in 2017-18. The total expenditure of the central government is likely to touch Rs 26 lakh crore in FY20, up from Rs 21.46 lakh crore estimated for the current fiscal. The Centre’s capital expenditure is expected to rise 25 per cent to Rs 3.9 lakh crore in 2019-20, with defence outlay alone jumping 22 per cent, as per the statement. The government is required to release this statement as per the Fiscal Responsibility and ...

Avishek G. Dastidar, August 11,2017 The government aims to roll out the red carpet for the industries servicing foreign tourists by giving such sops as “zero-rate GST” and even reimbursement of certain taxes to tour operators engaged in servicing foreigners. The Ministry of Commerce and Industry has sought comments from relevant ministries to draw up “Action Plan for Champion Sectors in Service” to be finally approved by the Cabinet. One of the focus areas is the meetings, incentives, conventions, exhibitions (MICE) sector, which is fast growing yet nascent in India. The draft Cabinet note proposes to bring Indian players engaged in this industry under a “zero-rate GST” regime if the payments are in foreign exchange, to boost exports. It also proposes to reimburse certain local taxes to bulk tour operators of foreign tourists, so that the benefits can be passed on to the tourists eventually. In an estimated business of $300 billion in the MICE economy in the world, India occupies...

Shubhajit Roy, August 11,2017 Finance Minister Arun Jaitley said Thursday that every account named in the Panama Papers investigation is being probed and that nobody would be punished without a proper process. He tried to draw a comparison with Pakistan, where Nawaz Sharif was removed as prime minister following preliminary probe. “Nobody has ever taken more action than this government on foreign account details which have come,” Jaitley said in Rajya Sabha while replying to a debate on the Banking Regulation (Amendment) Bill which was passed by the House later. Referring to the Panama Papers, the finance minister said, “We have a rule of law. We do not have a system like the neighbouring country where you remove first and then have a trial.” During the reply, Jaitley said tax authorities are conducting investigations and prosecutions are being launched in cases where documents have been received. “We first make our own investigations and on each one of those cases, wheth...

M Y Siddiqui, Ausgust 10,2017 A Parliamentary Committee on Demonetisation has submitted its report, which will be tabled during the Monsoon Session of Parliament. Accordingly, the report calls demonetisation a blunder. Not a single objective has been met, it reportedly says. Findings of the Committee reveal no major black money was found. It says Finance Ministry accepts that only details of 4,172 crores of suspicious money which could be black. (Prime Minister Modi had predicted 5-7 lakh crores would have been black). According to the Committee’s findings, demonetisation had no effect on terror funding. Neither cashless nor was less cash society formed as Finance Ministry was projecting. People have shifted back to pre-November 8, 2016, level cash transactions. In a further revelation, the report says demonetisation killed small scale industries and major unorganised sector. Bhartiya Mazdoor Sangh, a trade union affiliate of BJP, has reported a loss of four cror...

Surabhi, August 10,2017 The government is for the first time trying to get a handle on the country’s booming e-commerce market through a new survey and data available through the Goods and Services Tax. In its latest 74th round survey, the National Sample Survey Organisation (NSSO) is asking the consumers if they have used e-commerce websites. “There is a question in the household consumer expenditure survey, which is simply trying to see whether households use e-commerce in any form as part of their usual household transactions,” said TCA Anant, Chief Statistician and Secretary Ministry of Statistics and Programme Implementation. The first results of the survey, which will cover the entire country, are likely to be released in late 2018. But in the interim, the Ministry is also working with the Department of Revenue to tap into the data with the GST Network on taxpayers and businesses. “GST is going to throw light on the total amount of e-commerce as there are separate p...

August 10,2017 The Centre has projected a steady improvement in the economy over the next two years, with revenue gains from the Goods and Services Tax (GST) and demonetisation as well as a 25 per cent hike in its capital expenditure by 2020. “Any shocks to tax collections due to the GST will be absorbed in the current fiscal and the tax-GDP ratio will remain at the level of 2016-17,” said the Medium-Term Expenditure Framework Statement, which was tabled in Parliament on Thursday. However, the MTEFS is hopeful that the tax-to-GDP ratio will rise 30 basis points to 11.6 per cent in 2018-19, and further to 11.9 per cent in 2019-20. This is predicated on the expansion of the tax base with GST, and the increased surveillance post-demonetisation. Ahead of the release of the second volume of the Economic Survey in Parliament on Friday, the report expects nominal GDP growth to increase from 11.3 per cent in the current fiscal to 12.3 per cent in 2018-19 and 2019-20. It...

Vidya Ram, August 10,2017 The British government is pushing for Indian investment into the country’s real estate sector, beyond London, to support its drive to create more affordable housing across the country, among other things. “We have a diverse set of opportunities for inward investment from India,” Greg Hands, the Minister of State for Trade and Investment told  The Hindu  on Thursday. “We are particularly keen on getting investment beyond London as well — there are opportunities in real estate, infrastructure, particularly energy infrastructure.” Affordable housing “I think that Indian investors could play a big role in our affordable housing agenda,” he added. While foreign investors including from China and Qatar have made big inroads into the U.K. real estate market, the country has seen limited investment (beyond private investments in housing or hotels) from India. The exception is the Lodha group, which has two luxury housing projects in London and h...

Gayatri Nayak, August 11,2017 The demonetisation exercise has come with a cost to the government. The Reserve Bank of India will be transferring to the government only Rs 30,659 crore, less than half the amount- Rs 65876 crore it transferred to last year, implying lesser non-tax revenues to the government this year.  The reduction in the transfer of surplus to the government could be due to a number of factors including higher cost of printing new currency notes and cost of managing excess liquidity generated from phasing out of Rs 500 and Rs 1000 notes, though it is difficult to identify exact reasons at this stage. “  Operational expenses in cost of printing new currency and the associated logistics of collecting old notes is likely to have gone up ” said Saugata Bhattacharya, chief economist at Axis Bank. ” The cost of sterilising the excess liquidity through MSS and reverse repos would also be significant.”  ( During the year) foreign currenc...